VW employees in Wolfsburg
Restarting the auto industry after a shutdown is extremely time-consuming and time-consuming.
(Photo: dpa)
Munich, Düsseldorf The automotive industry is alarmed in two ways these days. On the one hand, industry heavyweights such as Volkswagen and Daimler have to cut back their production due to the global shortage of microchips and send thousands of employees on short-time work.
On the other hand, and in an emergency, that weighs even more heavily than the lack of components: Because new corona infections are still high in Germany, politicians are now discussing the renewed closure of entire plants in order to contain the pandemic.
If Chancellor Angela Merkel (CDU) and the Prime Ministers connect via video on Tuesday, car manufacturers and suppliers will have to expect further restrictions. The very thought of dormant tapes in the key industry ensures loud warnings and mobilization against a second shutdown, on a broad front.
For example, Hildegard Müller, President of the German Association of the Automotive Industry (VDA), warns of a break in global supply chains and the associated economic consequences. “The car production makes an important contribution to securing the income of many people, and is therefore also a prerequisite for the financing of the tasks of the state,” said Müller the Handelsblatt. In other words: The federal government needs the auto industry to reduce the mountain of debt that has piled up thanks to the support of the economy in fighting the pandemic.
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Daimler works council chairman Michael Brecht goes even further. For him, a production stop would not only be a “terrible picture”, but also a “danger to social peace in Germany”. In the end, society as a whole pays the bill for a shutdown because companies and employees can no longer pay into the social system, argues Brecht: “If the hygiene concepts are right, I am in favor of work.”
At Daimler, the corona protective measures are taking effect in the factories, assures HR manager Wilfried Porth: “The infection rates at our locations were and are below the incidence values of the urban and rural districts.” Two thirds of the administrative employees of the Dax group had been sitting for almost a year anyway mainly in the home office. In Stuttgart, the management and works council agree that the car plants are not a source of infection.
Five percent of the annual production volume threatens to be lost
Shutting down the plants would cause painful financial damage – and that in a situation in which the carmakers and especially their suppliers are already under enormous pressure. The German new car market alone shrank by a fifth last year. The industry is now longing for an upturn. But this is now being slowed down by a global shortage of semiconductor components.
Bernstein analyst Arndt Ellinghorst estimates that the global auto industry is threatened with a loss of production of two to 4.5 million cars this year as a result of the chip shortage. That would correspond to around five percent of the industry’s annual production volume. The list of affected carmakers is long and ranges from Daimler and Ford to Nissan and Honda to the recently merged Stellantis-Holding and Volkswagen from the Peugeot manufacturer PSA and Fiat Chrysler. The corporations are forced to take sometimes drastic measures – especially in Germany.
For example, Ford has to shut down its plant in Saarlouis for five weeks. Focus production will be suspended there until February 22nd, around 5,000 employees have been put on short-time work. Daimler prioritizes production. In Rastatt and Bremen, where the Mercedes manufacturer produces high-volume models such as the A-Class and GLC, thousands of employees will also have to work short-time in the next few weeks. All available chips are needed in Sindelfingen and in Tuscaloosa, USA – there, yields like the S-Class or the GLE roll off the assembly line.
In the VW Group, the Czech subsidiary Skoda is now also affected by the chip shortage for the first time. At the main plant in Mlada Boleslav north of Prague, the production figures for the compact Octavia model are being reduced. “In the short term we will have failures,” said a Skoda spokesman. However, the Czech Volkswagen subsidiary hopes to get by without short-time work. Instead of the Octavia, Skoda employees are to increasingly manufacture the new Enyaq electric model, for which there are still enough chips available.
At VW in Germany, the Passat plant in Emden, East Frisia, suffers the most from the lack of electronic components. Around 9,000 employees are on short-time work in Emden for two weeks. As a precaution, VW has registered short-time work for the components plant in Braunschweig.
If not enough chips are delivered in the next few weeks, VW in Braunschweig could always start short-time work at short notice and on a daily basis, as the group confirmed. There is also short-time work at the large Audi plants in Ingolstadt and Neckarsulm. Around 10,000 employees are affected.
During the Christmas season, Volkswagen received a message from several suppliers that promised chip volumes could no longer be delivered on time. “Since it became known, we have been working intensively within the Volkswagen Group to improve the supply situation in the short and medium term,” said Porsche boss Oliver Blume to the Handelsblatt, who is also a member of the VW Group Board of Management. In all activities, the aim is to secure the Group’s earning power as best as possible. “An example: the Porsche 911 is very popular with our customers and production is booked out for this year; that’s why we’re running at full speed here, ”added Blume.
Priority list: which models should get the remaining chips
The supplier Hella has converted many plants to a “stop-and-go operation”. According to a plant manager of a large supplier, “war rooms” have been set up in which suppliers and car manufacturers discuss priority lists for the individual vehicle models. The priority list indicates in which models the remaining chip contingents are to be used. The aim is to maintain the production of high-margin models for as long as possible.
The work resembles a kind of “defect management”, which leads to the first shift losses, according to the plant manager. Every now and then, important chip components are transported from one plant to another – sometimes even across national borders – when important semiconductor components are required there. We are still a long way from conditions like in spring 2020. At that time, the first wave of corona led to a failure in global automobile production.
The manager of another supplier did not fear contractual penalties. There are no confrontational signals from the car manufacturers. One tries to solve the problem together, which is mainly caused by the semiconductor manufacturers.
Overall, the chip disaster is likely to cost the auto industry several hundred million euros. “It’s painful, but the industry can cope with it,” believes capital market expert Ellinghorst. A complete corona shutdown of the plants in Germany, on the other hand, would be far more painful for the industry and could drive already ailing suppliers to the brink of insolvency.
The chip industry cannot currently deliver as much as customers from the automotive industry in particular would like. Semiconductor manufacturers fared much better in the past year than most experts expected. Sales have climbed a good seven percent to almost $ 450 billion. At the beginning of the pandemic in April, Gartner’s market researchers had expected a minus of almost one percent.
The experts explain the strong growth with the high proportion of home work and distance learning by students. “All the markets that made this activity possible have benefited,” said Gartner analyst Andrew Norwood. The semiconductor industry sold significantly more to the manufacturers of PCs, notebooks and network computers, the so-called servers. In addition, the new 5G mobile communications standard generated higher sales. Other areas of the chip industry, on the other hand, will shrink in 2020, according to Gartner’s market observers, including business with the automotive industry. The futile run on the chips, especially from the auto industry, apparently didn’t start until the end of the year.
This is also the case with TSMC: According to its own statements, the world’s largest contract manufacturer only felt a greater demand for car chips in the fourth quarter. Before that, business had been rather restrained for two years, according to CEO C. C. Wei. TSMC produces among others on behalf of semiconductor companies such as Infineon or NXP.
Chip maker TSMC’s largest customer is Apple
The two leading car chip providers, however, are not among the Taiwanese’s largest customers. For example, Apple has TSMC manufacture, the most important customer in the semiconductor industry worldwide. With chips for mobile communications and for PC manufacturers, TSMC achieves significantly larger quantities. As a result, the Taiwanese preferred other industries in view of the shortage of capacities in the fall.
Experts such as car professor Stefan Bratzel from the Center of Automotive Management (CAM) at the Bergisch Gladbach University of Applied Sciences also see the car industry as being responsible for the shortage of chips. Many managers from the industry have not yet understood that the chip manufacturers also have other customers and not only serve the vehicle industry. “I can imagine that that was underestimated,” said Bratzel. According to the ZVEI industry association, the chip industry only earns every tenth euro from semiconductors for vehicles. Almost two thirds of sales come from business with smartphones and computers.
Infineon, the car chip producer with the highest turnover, is buttoned up in view of the current shortage. “In principle, we cannot comment on individual customers,” said the Dax group on request. As the global number one in the automotive semiconductor market, the company is carefully monitoring the situation in the supply chain for the automotive industry. However, they did not say what conclusions the Munich residents are drawing from the current scarcity. Just this much: “A certain growth in automobile production is expected in 2021 and is taken into account in our planning.”
Electromobility in particular is one of the growth drivers, and global manufacturing capacities are being adjusted accordingly, Infineon adds. Investments in the current financial year would increase by up to 400 million euros to a maximum of 1.5 billion euros. Infineon plans to start production in its new plant in Villach towards the end of the year. There, Europe’s largest chip manufacturer builds so-called power semiconductors, as they are needed not least for the power supply in e-cars.
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